What really moves the dial of history? What historical forces actually sustain progress? These questions are so big and so important that many historians used to dwell on the biggest and most disruptive of historical events, war, to find answers. But, over the past couple of generations, it’s become quite clear that the manner in which we cooperate is more important to how we make progress than the manner in which we fight. Wars were waged for millennia, and the fortunes of civilizations waxed and waned. It’s only in the last several centuries that we’ve managed to sustain the growth in our prosperity whether war is raging or not, and a transformation in how we work together has been the driving force behind this miracle. Historians have awakened to the fact that something we all too often condemn has underwritten our progress in the modern world to make the gains of civilization actually stick, and compound on each other over time. This is the social technology that we call money.
Money is not as sinister as some people believe. Like any technology, money is only as good or as evil, as productive or destructive, as the people who use it. For, ultimately, money is not really dollars or cents, nor gold or silver, but a system of credit, which is really just a system of trust. In fact, most of the money in our economy, around 90 percent in the United States, has no kind of physical existence at all, but is merely recorded in the balances of our accounts. Fiat currencies and precious metals alike have been used as representative tokens of the credit that individuals and companies and states may accumulate, but the value of money is never in the tokens themselves, as any victim of hyperinflation could tell you. Rather, it is in the integrity of the credit those tokens facilitate; the integrity of the trust in our transactions. Credit, not coins, has been at the heart of financial innovation.
Communities that have figured this out, that have figured out how to leverage credit most effectively and how to facilitate its transfer between parties most efficiently, have sustained the most progress, from the Medician money exchange networks that funded the Italian Renaissance to the cutting-edge cryptography companies that are developing the blockchain-based, so-called internet of value today. That’s all that the blockchain revolution really is, after all; blockchain simply enables two parties who don’t necessarily trust each other to transact securely in the absence of a trusted third party such as bank or credit card company. It is the ultimate form of financial innovation that will produce an explosion of new wealth creation in the near future. But, how did money emerge to begin with? And, how has it evolved from coins to credit in a way that has enabled us to leverage money so much more productively in the modern world?
I give you money, and how it began.